Practice management tips from the '03 AAA meeting
Anonymous. Accounting Office Management & Administration Report. New York: Oct 2003. Vol. 03, Iss. 10; pg. 1
Abstract (Summary)
Sessions at the recent Association for Accounting Administration (AAA) national symposium in Montreal focused on current practice management issues of importance to firm administrators and managing partners. For firms that are considering going paperless, an intranet will be key to the process. About one-third of attendees at the intranet session reported that their firms have begun to perform paperless audits. About the same number are using .pdf tax forms and doing as much e-filing as possible. The partner succession issue is critical, since about a decade's worth of younger talent is missing at many firms. One danger in succession planning concerns buyouts. Many firms still follow the traditional approach which involves a percentage of past earnings times years of business. Firms should expect to see a continuing trend of acquisitions by $4-million to $20-million firms of $1-million to $1.5- million firms with two partners who are tired, find it hard to compete, and no longer enjoy their work.
Two sessions at the recent Association for Accounting Administration (AAA) national symposium in Montreal focused on current practice management issues of importance to firm administrators and managing partners.
The first was one of the small-group breakout discussions for which AAA's conferences are well known. AOMAR attended the session for firms with $2 million to $4 million in fees, but the observations we collected apply to any small or midsize firm.
A second session involved audience questions during a breakfast seminar, which were fielded by industry consultant Allan Koltin (www.pdi-global.com), who was able to shed light on a number of partner-specific concerns.
Highlights from the small-group breakout discussion:
* The importance of intranets. Firms are now learning how to use these effectively, those that are just building their intranets as well as those that are expanding them. And, like many technology areas, the set-up and cultural buy-in will take far more time than getting the technology operational. The tools have become quite simple, especially for small firms, which generally use Microsoft Front Page for their intranet software. A benefit to Front Page is its interface with the Microsoft Office programs.
Your firm can use a single in-office computer to operate the intranet and act as the Web server; in fact, small firms probably won't need to devote a separate computer to this function.
For help with intranets: One firm administrator who consults with CPA firms in establishing intranets is Jim Fahey, firm administrator for Brott Mardis & Co. (Akron, Ohio; jim@brottmardis.com). Another resource is AAA's guide to intranets, which is free to members.
* Going "paperless." For firms that are considering going paperless, an intranet will be key to the process. About one-third of attendees at this session reported that their firms have begun to perform paperless audits. About the same number are using .pdf tax forms and doing as much e-filing as possible.
Attendees advise firms that would like to make this change to start with just a few clients to learn how to do it, and then expand the program. And you needn't invest in an expensive program: You can work with Microsoft Internet Explorer to set up your own files. You can also get software from scanner vendors, although you may find that you have little or no need for high-end scanners. More important than the hardware is the interface.
Also key: Implementation strategy and firm culture. Paperless firms need someone to "own" or take responsibility for the project, to see that it proceeds at an acceptable pace, deadlines are met, and that the new file structure is correct.
* Partner accountability. Firm administrators are always concerned about this issue and it is becoming increasingly important among firm owners as well.
Administrators can do only so much to track operations-partners must accept responsibility if things are to get done, agreed several participants in the session. "This is a cultural issue," noted one firm administrator. You need consensus, a strong managing partner, and a written performance plan. Expect any cultural changes to take "more time than you'd think."
* Budgets for staff appreciation/incentive programs. One firm administrator observed how important it is in a merging firm that has separate locations to use one system to encourage a single culture. Most attendees said their firms had incentive programs for getting new clients, hitting performance goals, and recruitment. But they cautioned that bonuses don't always work as incentives, especially if firm members expect them. If your firm uses bonuses, be clear about their purpose.
In addition to monetary rewards, consider recognizing people's achievements at brief staff meetings at which you can also share information about engagements and other firm data, and morale-boosting programs (contests and trivia games were mentioned as examples).
* Sharing financial information with staff. The firm administrators in the session supported an open-books policy: Staff like to know where the firm stands, and who the achievers are. They expect to be informed about what's going on-it makes them feel part of the team and breeds loyalty.
Partner issues. The breakfast session led by Allan Koltin focused on more partner-related issues, which are no less important to practice management. Key topics:
* Partner succession. This issue is critical, since about a decade's worth of "younger" talent is missing at many firms, Koltin noted. "Now we are beginning to pay the price." The issue has many facets besides finding and grooming talented CPAs to become partners.
"A good succession plan begins the day the account comes into the firm," he asserted. The work needs to become the work of the firm over time, not just the work of a particular partner.
One danger in succession planning concerns buyouts. Many firms still follow the traditional approach which involves a percentage of past earnings times years of business. Koltin urges firms to consider instead the age of the retiring partner's clients-old clients will disappear from the firm long before the payout of the retired partner is complete. He believes that tying the payout to the longevity of the client makes sense financially. However, it can encourage partners to cling to their clients instead of sharing them with the firm-the opposite of what is best for the firm.
The real solution, according to Koltin, is funded retirement, but this is a goal that continues to elude many firms. Until they can accomplish this, a capped payment tied to a percentage of retirement fees and the bottom line is probably the best approach.
* Corporate vs. partnership business models. The profession is moving for now to the corporate model. Koltin says the best managing partners run the firm like a business and treat partners as business partners.
Firms that want to embrace the corporate model will have to do away with one partner having one vote, and requiring a 75% majority to make a change. They'll also need to consider having several levels of partners, including equity, non-equity, and director levels.
* Length of term of service for managing partners. Because managing partners rarely hold the position throughout their careers, firms need to consider how to structure the job. Will the managing partner give up some of his or her book of business to perform the administrative duties? If so, the firm should probably help the person rebuild that book of business after completing the term of service. Moreover, it's important for managing partners to hand over the reins fully to their successors.
Consider having a non-CPA "managing principal" run the firm, Koltin suggests. This can work well for the firm, as long as the partners take what this person says seriously. No matter who runs the firm day to day, partners must not become isolated from decisions made about management and client service issues.
* Valuation of mergers and acquisitions. What are CPA firm practices being sold for now? The one-times-gross-fees traditional measure is still around, Koltin noted. Expect to see a continuing trend of acquisitions by $4-million to $20-million firms of $1-million to $1.5- million firms with two partners who are tired, find it hard to compete, and no longer enjoy their work.
* Value and high billing rates. The most profitable firms set high billing rates for their partners-and they get paid. Koltin proposed a multiplier of utilization times realization. Partners need to focus on what they do to deliver value to set their rates, he said.
* Firm association membership. Today, firms need depth and resources and can get them in the strategic "partners" of a firm association. Also, as an association member, you can learn from others about new areas. In fact, not joining an association and using as much as possible from its offerings causes you to under-serve your clients, Koltin claimed. It also puts you at a disadvantage among larger CPA firms, which are marketing ever more services and core business functions to clients now.
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Sessions at the recent Association for Accounting Administration (AAA) national symposium in Montreal focused on current practice management issues of importance to firm administrators and managing partners. For firms that are considering going paperless, an intranet will be key to the process. About one-third of attendees at the intranet session reported that their firms have begun to perform paperless audits. About the same number are using .pdf tax forms and doing as much e-filing as possible. The partner succession issue is critical, since about a decade's worth of younger talent is missing at many firms. One danger in succession planning concerns buyouts. Many firms still follow the traditional approach which involves a percentage of past earnings times years of business. Firms should expect to see a continuing trend of acquisitions by $4-million to $20-million firms of $1-million to $1.5- million firms with two partners who are tired, find it hard to compete, and no longer enjoy their work.
Two sessions at the recent Association for Accounting Administration (AAA) national symposium in Montreal focused on current practice management issues of importance to firm administrators and managing partners.
The first was one of the small-group breakout discussions for which AAA's conferences are well known. AOMAR attended the session for firms with $2 million to $4 million in fees, but the observations we collected apply to any small or midsize firm.
A second session involved audience questions during a breakfast seminar, which were fielded by industry consultant Allan Koltin (www.pdi-global.com), who was able to shed light on a number of partner-specific concerns.
Highlights from the small-group breakout discussion:
* The importance of intranets. Firms are now learning how to use these effectively, those that are just building their intranets as well as those that are expanding them. And, like many technology areas, the set-up and cultural buy-in will take far more time than getting the technology operational. The tools have become quite simple, especially for small firms, which generally use Microsoft Front Page for their intranet software. A benefit to Front Page is its interface with the Microsoft Office programs.
Your firm can use a single in-office computer to operate the intranet and act as the Web server; in fact, small firms probably won't need to devote a separate computer to this function.
For help with intranets: One firm administrator who consults with CPA firms in establishing intranets is Jim Fahey, firm administrator for Brott Mardis & Co. (Akron, Ohio; jim@brottmardis.com). Another resource is AAA's guide to intranets, which is free to members.
* Going "paperless." For firms that are considering going paperless, an intranet will be key to the process. About one-third of attendees at this session reported that their firms have begun to perform paperless audits. About the same number are using .pdf tax forms and doing as much e-filing as possible.
Attendees advise firms that would like to make this change to start with just a few clients to learn how to do it, and then expand the program. And you needn't invest in an expensive program: You can work with Microsoft Internet Explorer to set up your own files. You can also get software from scanner vendors, although you may find that you have little or no need for high-end scanners. More important than the hardware is the interface.
Also key: Implementation strategy and firm culture. Paperless firms need someone to "own" or take responsibility for the project, to see that it proceeds at an acceptable pace, deadlines are met, and that the new file structure is correct.
* Partner accountability. Firm administrators are always concerned about this issue and it is becoming increasingly important among firm owners as well.
Administrators can do only so much to track operations-partners must accept responsibility if things are to get done, agreed several participants in the session. "This is a cultural issue," noted one firm administrator. You need consensus, a strong managing partner, and a written performance plan. Expect any cultural changes to take "more time than you'd think."
* Budgets for staff appreciation/incentive programs. One firm administrator observed how important it is in a merging firm that has separate locations to use one system to encourage a single culture. Most attendees said their firms had incentive programs for getting new clients, hitting performance goals, and recruitment. But they cautioned that bonuses don't always work as incentives, especially if firm members expect them. If your firm uses bonuses, be clear about their purpose.
In addition to monetary rewards, consider recognizing people's achievements at brief staff meetings at which you can also share information about engagements and other firm data, and morale-boosting programs (contests and trivia games were mentioned as examples).
* Sharing financial information with staff. The firm administrators in the session supported an open-books policy: Staff like to know where the firm stands, and who the achievers are. They expect to be informed about what's going on-it makes them feel part of the team and breeds loyalty.
Partner issues. The breakfast session led by Allan Koltin focused on more partner-related issues, which are no less important to practice management. Key topics:
* Partner succession. This issue is critical, since about a decade's worth of "younger" talent is missing at many firms, Koltin noted. "Now we are beginning to pay the price." The issue has many facets besides finding and grooming talented CPAs to become partners.
"A good succession plan begins the day the account comes into the firm," he asserted. The work needs to become the work of the firm over time, not just the work of a particular partner.
One danger in succession planning concerns buyouts. Many firms still follow the traditional approach which involves a percentage of past earnings times years of business. Koltin urges firms to consider instead the age of the retiring partner's clients-old clients will disappear from the firm long before the payout of the retired partner is complete. He believes that tying the payout to the longevity of the client makes sense financially. However, it can encourage partners to cling to their clients instead of sharing them with the firm-the opposite of what is best for the firm.
The real solution, according to Koltin, is funded retirement, but this is a goal that continues to elude many firms. Until they can accomplish this, a capped payment tied to a percentage of retirement fees and the bottom line is probably the best approach.
* Corporate vs. partnership business models. The profession is moving for now to the corporate model. Koltin says the best managing partners run the firm like a business and treat partners as business partners.
Firms that want to embrace the corporate model will have to do away with one partner having one vote, and requiring a 75% majority to make a change. They'll also need to consider having several levels of partners, including equity, non-equity, and director levels.
* Length of term of service for managing partners. Because managing partners rarely hold the position throughout their careers, firms need to consider how to structure the job. Will the managing partner give up some of his or her book of business to perform the administrative duties? If so, the firm should probably help the person rebuild that book of business after completing the term of service. Moreover, it's important for managing partners to hand over the reins fully to their successors.
Consider having a non-CPA "managing principal" run the firm, Koltin suggests. This can work well for the firm, as long as the partners take what this person says seriously. No matter who runs the firm day to day, partners must not become isolated from decisions made about management and client service issues.
* Valuation of mergers and acquisitions. What are CPA firm practices being sold for now? The one-times-gross-fees traditional measure is still around, Koltin noted. Expect to see a continuing trend of acquisitions by $4-million to $20-million firms of $1-million to $1.5- million firms with two partners who are tired, find it hard to compete, and no longer enjoy their work.
* Value and high billing rates. The most profitable firms set high billing rates for their partners-and they get paid. Koltin proposed a multiplier of utilization times realization. Partners need to focus on what they do to deliver value to set their rates, he said.
* Firm association membership. Today, firms need depth and resources and can get them in the strategic "partners" of a firm association. Also, as an association member, you can learn from others about new areas. In fact, not joining an association and using as much as possible from its offerings causes you to under-serve your clients, Koltin claimed. It also puts you at a disadvantage among larger CPA firms, which are marketing ever more services and core business functions to clients now.
